The ban on tenant fees is coming: How it could affect landlords and tenants

There was big news last week that could affect landlords and tenants across the country. Yes, the long-awaited ban on tenant fees is coming into force on June 1 this year.

But how will it actually affect landlords and tenants? Whitegates has the answers...

Who will be affected by the tenant fees ban?

All landlords and lettings agents in England and Wales will need to abide by the new legislation, although the regulations in Wales are likely to be slightly amended.

What tenancies will be affected by the fees ban?

Any new tenancies or renewed tenancies after June 1 2019 will be subject to the ban on fees.

Once 12 months has passed, so June 2020, the ban will spread out to tenancies signed before June 2019 and fee-related stipulations in those agreements will no longer be valid.

What fees will no longer be able to be charged?

Examples of fees that fall under the tenant fees ban and will no longer be allowed include:

* Guarantor form fee

* Cleaning services fee

* Referencing fee

* 'Admin' fees

* Credit check fee

* Inventory fee

* Other 'services' fees (gardening, professional cleaning, de-flea)

What fees can lettings agents and landlords still charge?

Rent, holding deposits and tenancy deposits will still be allowed, as will charges if tenants default on their agreement.

However, the government is clamping down on deposits and default charges and these will be capped under the tenant fees ban.

Deposits will be capped at five weeks' rent for a year-long tenancy of less than £50,000 in rent, while tenancies of more than £50,000 in a year will see deposits capped at six weeks' rent.

Agents and landlords will only be able to charge one week of rent as a holding deposit and this will need to be returned within seven days if 15 days passes with no decision or the landlord decides not to go ahead with the tenant.

If the tenant decides not to go ahead after placing a holding deposit, repayment does not need to be made in full.

As with the current rules, a holding deposit can be used as part payment of rent or main deposit if a tenancy goes ahead, but holding deposits not used for either purpose need to be returned within seven days of the tenancy beginning.

Under the new legislation, landlords or agents can charge tenants for late payment of rent or losing keys to their property - but once again these charges are capped and landlords will need to prove the costs incurred in writing and with valid receipts.

For late payment of rent, landlords or agents can charge a maximum of 3% above the base interest rate from the date the tenant missed their rent payment.

Finally, agents and landlords are able to charge small fees if tenants request amendments to a tenancy agreement mid-term, although this fee is capped at £50 unless a landlord can prove in writing that higher costs have been incurred.

Can landlords still deduct from a deposit under the tenant fees ban?

Yes they can. Deductions for damage away from what is considered fair wear and tear can be made, while deductions for late or failure to pay rent are also permitted.

Are there fines for breaching the tenant fees ban?

Landlords or agents who continue to charge fees under the tenant fees ban will be punished.

Tenants can apply for a refund of banned fees through the county court, while a landlord or agent can be charged interest from the day a banned fee was taken.

Fines of up to £5,000 can be issued by Trading Standards for first-time offenders, but those who repeatedly take banned fees can face fines of up to £30,000 and a banning order.

Landlords are also unable to issue section 21 notices on tenants where fees have been collected and not paid back.

Whitegates' advice for landlords and tenants

Chan Khangura, of Whitegates Huddersfield, says: "Passing this cost of the fees ban to the landlord will be quite difficult in the sense they are continually being "battered" by the government and it will essentially be seen as yet another tax.

"Some landlords may leave the market altogether, but that will bring opportunities for larger landlords who will continue to invest.

"For tenants, rents could rise as inevitably landlord fees will reluctantly have to increase in some way, shape or form."

Content based on current draft of the Tenant Fees Bill (December 11, 2018). Should the draft bill change, this piece will be updated.